On the evening of June 15, 2012, the Philippines conceded a dramatic ten-week standoff to China by withdrawing its maritime vessels from the waters surrounding Scarborough Reef, a group of tiny outcrops 120 miles west of Subic Bay. Like many islands and rocks in the South China Sea, the sovereignty of Scarborough Reef is contested by multiple claimants, in this case China, the Philippines and Taiwan. And although Asian leaders are quick to eschew notions of zero-sum competition, there was no question that Beijing had scored a tactical victory at Manila’s expense by successfully seizing and occupying the disputed area.

The crisis could have led to regional war. Dozens of government vessels and fishing boats were floating in dangerously close proximity to the reef in the context of contested territory and restive publics. But more profoundly, the standoff at Scarborough Reef demonstrated that U.S. efforts to deter Chinese assertiveness were not working. Soon after the Philippines departed the reef, Chinese officials and pundits began speaking of a “Scarborough Model” for exerting regional influence and annexing disputed territories. Inspired by events, leading Chinese scholars are now exploring strategies of “extended coercion” (a play on extended deterrence) through which China could pressure U.S. allies while keeping Washington at bay.

More Chinese coercion in the South China Sea would run counter to U.S. interests. In addition to threatening regional peace and prosperity, it would raise further questions about America’s staying power in Asia and sow serious doubts about the value of partnering with the United States.

As China draws lessons from its standoff with the Philippines and looks to employ similar methods elsewhere, so too must the United States learn to check this behavior by understanding exactly what happened at Scarborough Reef, why Chinese coercion was so effective, and what can be done differently in the future.

THE crisis was born when a Philippine Navy surveillance plane detected eight Chinese fishing vessels near Scarborough Reef on April 8, 2012. As suspected, they were found with illegal and endangered giant clams, corals and live sharks, in violation of Philippine law. The Philippines then deployed the BRP Gregorio del Pilar, a decommissioned U.S. Coast Guard cutter, to arrest the fishermen. What the Philippines reconnaissance plane had failed to see, however, was that Chinese maritime-surveillance vessels were also in the area. Despite the fact that the Philippines regularly uses naval vessels for interdiction operations (necessary because of its limited number of combined navy and coast guard ships), the Chinese acted incensed that the Philippines had employed a military vessel for law-enforcement activities.

Accusing Manila of militarizing the dispute, Beijing engaged in what scholar Stephanie Kleine-Ahlbrandt has aptly termed “reactive assertiveness,” quickly dispatching maritime vessels to prevent the Philippines from detaining the fishermen. With government ships squaring off at the shoal, the countries became locked in a face-to-face test of sovereignty.

Demanding that the Philippines immediately withdraw, China rapidly escalated the dispute by matching and then greatly outnumbering the few Philippine vessels that had arrived to relieve its frigate. Chinese maritime vessels, reportedly working in concert with private fishermen, then took the extraordinary step of erecting a rope barrier across the mouth of the C-shaped lagoon, which first trapped Filipino fishermen inside the reef and then blocked their re-entry once they were permitted to exit. All the while, People’s Liberation Army Navy (PLAN) vessels were floating over the horizon, sending Manila an ominous message not to make trouble.

Beijing took to economic coercion as well, announcing unprecedented inspections of Philippine bananas that were left to rot on Chinese ports. A widespread travel ban drastically cut the number of Chinese tourists visiting the Philippines.

As the standoff grew tenser, traditional diplomatic channels yielded few results. That communications were poor between Beijing and Manila was partially due to circumstances that had nothing to do with the crisis. The Philippines had yet to fill its vacant ambassadorship to China and the Chinese ambassador to the Philippines was considered ineffective and out

of sync with Beijing.

Further complicating matters, the lead Chinese diplomat in Beijing, Vice Foreign Minister for Asia Fu Ying, happened to have been China’s ambassador to the Philippines in 1999 when China had provocatively advanced its claims in the South China Sea by building a military installation on the disputed Mischief Reef (which it had seized in 1995). As one Philippine official observed: “If there’s anyone who knows how to steal islands, it’s she.” Attempts to develop credible back channels between Manila and Beijing failed to gain traction.

The two governments’ inability to talk to each other implicated the United States as the default interlocutor and referee. Both began their own private negotiations with U.S. officials, who then had to relay messages back and forth between the sides.

Although China was loathe to call the United States a mediator, Beijing was imploring Washington to pressure the Philippines to back down, describing the leadership in Manila as emotional, unpredictable and emboldened to reckless adventurism by announcements from President Obama and his cabinet that the United States was rebalancing attention and resources to Asia.

Meanwhile, diplomacy between the United States and the Philippines reflected a shared recognition of the importance of continued caution and restraint. Manila was at once hoping for a return to the status quo ante while seeking clarity on the conditions under which the alliance’s Mutual Defense Treaty would trigger U.S. military intervention. A ministerial-level meeting between Secretaries Clinton and Panetta with their Philippine counterparts in April 2012 and a visit by President Aquino to Washington in June sought to send a signal of alliance unity, although in public the United States studiously preserved its “strategic ambiguity” regarding the treaty implications of an outbreak of hostilities in the South China Sea.

After weeks of discussions, demarches and negotiations, U.S. officials in mid-June brokered what they thought was a deal for a mutual withdrawal. Exhausted, outnumbered and lacking viable alternatives, Manila withdrew its remaining ships under the facing-saving auspices of an oncoming typhoon. China, on the other hand, failed to comply with the agreed-upon deadline and retained its maritime vessels at the shoal, where they remain today on near-constant patrol.

ALTHOUGH the U.S. military maintains the ability to deter major power war in Asia, the threat of large-scale conflict is remote. Instead, regional instability is more likely to derive from disputes and contestation occurring in a gray zone between war and peace.

China harbors a number of strategic advantages in this environment, a fact not lost on Beijing. It was no accident that non-military maritime vessels served as the leading edge of Chinese coercion at Scarborough Reef. This helped to ensure that the dispute would be settled as a lopsided arm wrestle between China’s large and highly capable coast guard and the Philippines’ near non-existent counterpart. Beijing pressed this advantage right up to—but still below—the line of militarization, which would have increased the likelihood of response by the U.S. Navy.

In addition to the yawning gap in Chinese and Philippine maritime capabilities, Beijing also exploited its asymmetry of stakes with the United States. Foreign-ministry officials were quick to cite nationalist voices both in the PLA and the Chinese public calling upon the government to use force against the Philippines. Senior-level policymakers in Beijing indirectly referred to China’s claims in the South China Sea as a “core interest,” which is shorthand for issues like Taiwan and Tibet over which China is willing to go to war to prevent opposition forces or adversaries from achieving their aims.

In response, U.S. officials were cautious, not wanting to provoke China into conflict. The dilemma for the United States was further sharpened by Beijing’s unwillingness to open credible channels with Manila. Responsibility for negotiating a resolution to the crisis therefore fell squarely on the United States. The ancillary effect was that the dispute became principally a U.S.-China issue, invoking all the complexity that comes with maintaining stable Sino-U.S. relations. Beijing reinforced this dynamic by publicly and privately blaming the United States for the Philippines’ actions.

To prevent the region from coalescing behind Manila, China moved to isolate the Philippines and drive a wedge in the Association of Southeast Asian Nations (ASEAN). This was relatively easy at the outset, given that a number of regional countries shared China’s public position that the Philippines was to blame for instigating the crisis by employing a naval vessel for law enforcement activities. The standoff also erupted at a time when the Philippines was seen as an outlier in ASEAN’s internal efforts to reach a consensus on a regional Code of Conduct (COC) for the South China Sea.

But as time wore on, and particularly after China erected a physical barrier at the reef, there was a growing consensus in the region that Beijing had overplayed its hand. The time for public scrutiny would come at the upcoming ASEAN Regional Forum (ARF) in July and then the East Asia Summit leaders’ meeting later that fall.

Anticipating this, Beijing responded with a diplomatic two-step. First, after months of obstinacy, China announced its willingness only days prior to the 2012 ARF to enter talks on the Code of Conduct later that year. However hollow, this effectively muted what otherwise would have been a leading point of criticism from regional capitals.

With ample economic influence to throw around, Beijing also sought to divide ASEAN, in this instance by buying off Cambodia, the 2012 ASEAN chair and host of the ARF. Chinese President Hu Jintao visited Phnom Penh prior to the summit with promises of millions of dollars in investment and assistance. This was enough to convince Cambodia to limit discussions on sensitive maritime issues that would have highlighted China’s assertiveness. Unable at the ARF to agree on language for the South China Sea, the body failed to issue a joint communiqué for the first time in its forty-five-year history.

In the end, not all of these schemes worked perfectly, but together they amounted to a Chinese victory at Scarborough Reef. China possessed vastly superior maritime capabilities to the Philippines and demonstrated unmatched resolve. Beijing further isolated the Philippines and ensured that ASEAN was unable and unwilling to come to its rescue. Meanwhile, Beijing worked to keep Washington at bay by relying on civilian maritime vessels and forcing the issue into the broader context of U.S.-China relations.

Whether or not Beijing made all of these moves consciously and strategically is now immaterial. The cumulative effect was the same and the learning since then is readily apparent. Although the precise future of China’s assertiveness is yet unknown (even in Beijing), China has already sought to replicate aspects of this model against Japan, Malaysia, the Philippines and Vietnam.

THERE are those in the United States who do not view Chinese assertiveness with particular alarm. From their vantage point, accommodation is preferable to risking war over “a bunch of rocks.” But U.S. officials ought to think seriously whether they are willing to accept a regional order in Asia in which might makes right.

Carefully accounting for events at Scarborough Reef, the United States should seek to enhance regional stability by pursuing three lines of effort toward U.S. allies and partners, the region as a whole, and, of course, China.

A first-order task for the United States is to help build the capacity of regional states to deter and counter China’s maritime coercion. This does not mean instigating arms racing or setting unrealistic goals of trying to match China’s enormous material advantage. Instead, U.S. assistance should focus on supporting maritime law enforcement capabilities, including the requisite intelligence and maritime-domain awareness assets, such that countries can more confidently and capably police their shores. More widely shared and available information would also have a deterrent effect against those who might otherwise test the bounds of acceptable behavior.

In the longer term, the United States should help regional countries develop asymmetric capabilities to deter high intensity conflict. China has pursued a strategy of “anti-access/area denial” to challenge the force projection capabilities of the U.S. military in East Asia. Relatively weaker powers could instill greater caution in Beijing by adopting a similar approach to dissuade Chinese coercion.

Second, the United States should seek to strengthen multilateral cooperation and limit China’s ability to isolate individual states. Washington can contribute to an increasingly networked security environment by supporting the burgeoning bilateral and multilateral intra-Asia security ties that are developing between countries in the region, including Australia, India, Japan, the Philippines, Singapore, South Korea and Vietnam.

Even more important is that the United States continues to be a leading supporter of ASEAN and ASEAN-centered institutions. The participation of major outside powers, in venues like EAS and the ASEAN Defense Ministers Meeting Plus, enhances ASEAN’s cohesion and purpose by providing critical injections of legitimacy and capability.

Furthermore, building multilateral habits of cooperation and developing diplomatic and institutionalized dispute mechanisms will be necessary to provide alternative peaceful means for managing and resolving crises outside of military flexing and other forms of coercion. It is imperative that U.S. officials commit to a high-tempo engagement calendar in Asia that holds steady even when international crises arise elsewhere.

Supporting adherence to international law is essential. The Philippines has turned to the International Tribunal for the Law of the Sea to adjudicate a number of disagreements with China in the South China Sea. The United States should get behind this process and—in advance of the ruling—call upon China to abide by the tribunal’s decisions and push influential allies and partners including Australia, the European Union, India, Indonesia and Singapore to do the same. Admittedly, the unwillingness of the U.S. Senate to ratify the UN Convention on the Law of the Sea makes this more difficult, to the detriment of U.S. national interests.

While the United States continues to support China-ASEAN negotiations on a Code of Conduct, it should pursue a parallel track of encouraging stabilizing confidence-building mechanisms, such as crisis hotlines between claimant capitals, and other maritime safety initiatives, like incidents at sea agreements, which could be adopted in the near term. In future crises, U.S. diplomacy should prioritize helping allies and partners develop and maintain open communication channels with China, rather than falling into the role of intermediary.

Finally, the United States will have to consider new avenues for affecting Chinese decision making. To date, private diplomacy and strong public rhetoric have proven insufficient. So too have U.S. urgings that China act like a responsible great power.

The problem is that China is unlikely to cease its persistent territorial nibbling in the East and South China Seas as long as Beijing believes it can do so at minimal downside risk. At the end of the day, U.S. officials will have to consider when and how to impose costs on China if it continues attempting to revise the territorial status quo in Asia.

Washington has more running room to play tough than most U.S. policymakers acknowledge. The current Chinese leadership, facing extraordinary economic, environmental, political and social challenges at home, understands well the imperative of maintaining stable ties with the United States.

In the context of continued robust engagement with Beijing, U.S. policymakers should also explore—and signal a willingness to use—a range of cost-inducing measures within the bounds of maritime security if China’s assertiveness grows chronic, threatens U.S. allies and partners, and undermines regional stability.

Potential policy tools for cost imposition include enhancing the U.S. military presence in the region, expanding the scope of U.S. security guarantees with allies and partners, broadening the types of military capabilities the United States is willing to transfer, altering the U.S. position of neutrality on certain sovereignty disputes, offering legal assistance to countries willing to participate in international arbitration and treating Chinese maritime vessels as naval combatants if they engage in aggressive and physical coercion.

None of these options should be taken lightly, but U.S. recitations of national interests in the South China Sea are largely irrelevant if they cannot credibly answer the simple retort of: “Or what?”

Scarborough Reef was a tactical victory for China, but it also revealed Beijing’s formula of exploiting weaker states, dividing multilateral institutions and keeping the United States on the sidelines. To stem the dangerous trend of mounting Chinese assertiveness in its near seas, Washington should focus on building partner capacity, strengthening regional institutions and ultimately making clear to Beijing that the “Scarborough Model” will no longer be cost-free.

Ely Ratner is deputy director of the Asia-Pacific Security Program at the Center for a New American Security. You can follow him on Twitter:@elyratner.

Image: U.S. Navy Flickr.